The ‘golden billion’ is up to its neck in crisis

Andrey Yashlavsky

Against the background of problems with the supply of energy resources, exacerbated by sabotage on gas pipelines in the Baltic, against the backdrop of disrupted global trade chains in the G7 countries, a cost-of-living crisis is growing. Polls show that residents of the world’s richest economies expect social unrest and public protests in the near future. What are the authorities of the countries belonging to the “golden billion” trying to do to save their citizens from the crisis?
Great Britain: warmth and shelter in libraries
In an effort to find a way out of the cost of living crisis, the Liz Truss government is preparing to unveil a massive tax relief package, along with around £150bn worth of energy price caps on UK households and businesses.
In the meantime, while politicians and officials develop their programs, British libraries have responded to deteriorating living conditions not only by abolishing late book fines (to encourage people to use their services more and ease financial pressure), but also by offering warmth and shelter to vulnerable people – as another way to help during a cost of living crisis. However, only 4% of librarians expect to receive any additional funding for this activity.
The ongoing depreciation of the pound in the UK looks set to trigger a second cost-of-living crisis for Britons, clothing retailer Next (NXT.L) warned recently, cutting its sales and profit forecasts.
“It looks like we could have two cost-of-living crises, this year due to supply cuts, and next year due to price hikes linked to the exchange rate as the devaluation kicks in,” predicts Next CEO Simon Wolfson. With about 500 stores and online, Next is often seen as an indicator of how British consumers are doing, Reuters notes. It’s still too early to tell what impact the bailout will have, Wolfson said, but looking to 2023-24, he said if the pound’s weakness continues, it will likely drive up selling prices, especially in the second half of the year.
In the meantime, a study in Britain has shown that parents facing rising electricity bills are cutting back on the amount of food they buy and eating cold meals to save on electricity, writes The Guardian. A quarter of Brits who have at least one child under the age of 18 have cut back on the amount of groceries they buy to make sure they can afford other essentials, including rising gas and electricity bills.
A YouGov survey commissioned by charities National Energy Action and the Food Foundation found that 28% of parents have also reduced the quality of the food they buy. A survey of 4,280 adults found that more than one in 10 parents ate cold meals or meals that did not require cooking to save money on energy.
Despite Liz Truss’s policy of freezing the typical household electricity bill at £2,500, which could cost the government over £100bn in funding, many households will still struggle to afford the new tariffs as they are almost double the average bill of £1,271 a year ago.
This increase is equivalent to almost a third of what a very low-income family of two adults and two children spends on food during the year. Rising costs meant the number of British households experiencing fuel poverty would rise from 4.5m last October to 6.7m now, according to National Energy Action. And 67% of parents are worried that rising energy prices will mean they have less money to buy food. More than half are concerned about the outlook for this winter and the impact on their family’s health.
Adam Scorer, executive director of National Energy Action, says: “People had to choose between heating and food. This winter, millions will not even have that choice. The most vulnerable, including children, will starve and freeze as energy prices soar, despite government support.”
Dominic Watters, a single father who lives on a c-ouncil estate in Kent, spoke of his anxiety: “When the power goes out, I live in a state of emergency, not knowing if I can cook a meal, boil a kettle, wash my daughter’s uniform, or even take a shower. “.
Watters says he’s “afraid” when the power goes out at night because the food in the freezer goes bad. “It’s a pretty harsh lifestyle,” he said.
France: “the most generous in Europe”
In France, only one in 20 respondents say they are coping well with rising prices, compared with one in five in the UK and Germany, according to a YouGov survey published in early September. At the same time, according to the survey, every fifth resident of France uses his savings to pay bills, and every tenth skips meals.
Instead, French ministers argue that France has become the most generous country in Europe, helping households cope with the crisis in the cost of living, namely by limiting the rise in gas and electricity prices, The Guardian notes. Until the end of this year, gas prices will remain frozen, and electricity price growth will be limited to 4%. At the beginning of next year, the increase in electricity and gas prices for the population will be limited to 15%.
In August, the French parliament approved a series of new measures for households as rising inflation pushes down wages. These include increases in public sector wages, a 4% increase in pensions and some social benefits, a cap on rent increases at 3.5% for existing tenants in the French mainland, and an increase in means-tested student grants.
The government also subsidized discounts on gasoline and diesel fuel.
French companies are encouraged to offer employees an annual tax-free bonus of up to €6,000, up from the previous limit of €1,000. Workers covered by the 35-hour workweek will be able to convert overtime into extra money.
The government has also abolished TV license fees (€138 per year on the French mainland).
Last December, the French authorities provided a one-off payment of 100 euros to help low-income families cope with rising fuel prices. In September, the government provided an “exceptional” aid of 100 euros – plus 50 euros for each child – to low-income families receiving social benefits.
Since autumn 2021, gas and energy price caps, including fuel discounts, have cost the French government 24 billion euros. France must also completely renationalize its electricity giant EDF in response to the energy crisis.
Italy: “spent the most”
The Italian government has allocated 59.2 billion euros since September last year to protect households and businesses from soaring energy prices, with the latest tranche of 14 billion euros announced by Prime Minister Mario Draghi the other day.
The aid package puts Italy “among the countries in Europe that have spent the most” on the problem, Draghi said. The measures include increasing and extending until November tax breaks for energy-intensive firms, easing the situation of small and medium-sized businesses and increasing financial support for low-income families.
The scheme also provides a lump sum of €150 for 22 million employed and retired people with an annual income of less than €20,000. At the same time, the reduction in the excise tax on gasoline will be valid until the end of November. Draghi said the government is “helping families and businesses without putting public finances at risk or causing market tensions.”
However, the new government that will lead Italy after the right-wing coalition won the recent elections will be responsible for implementing the measures, addressing cost of living issues in the coming winter after elections on Sunday. The winning coalition, made up of the far-right Brothers of Italy, the League and Silvio Berl-usconi’s Forza Italia party, is predicted to resume at least some measures so that Italy can get through the winter.
Germany: package by package
In total, the German government has announced three aid packages to help consumers and businesses cope with inflation, which stood at 7.9% in August.
These measures, totaling more than 95 billion euros, divided among the federal government, 16 federal states and municipalities, include a one-time lump sum payment of 300 euros for pensioners and a September tax credit of the same amount for people with permanent jobs. It also includes a €200 lump sum for university students, an increase in rent subsidies to cover rising heating costs, a €500 increase in welfare payments, a €100 lump sum per child and a permanent monthly supplement, according to The Guardian. for 18 euros per child child allowances.
Germany is also changing its income tax plan to prevent an increase in tax liabilities, expanding government lending to help otherwise healthy companies, and expanding a heavily subsidized public transport ticket scheme (which, The Guardian notes, has yet to be developed).
The package also includes support for the EU’s efforts to limit profits for energy companies, as well as measures to curb the huge pace of growth in electricity bills and delay the implementation of the planned increase in carbon prices in 2024.
The German government promised to “do everything possible to ensure uninterrupted power supply.” This includes the recent decision to nationalize the €29bn energy supplier Uniper.
Japan: bread and noodles rise in price
Japanese Prime Minister Fumio Kishida’s approval ratings plummeted on rising prices and revelations of his party’s ties to the Unification Church following the assassination of former prime minister Shinzo Abe.
After decades of deflation, households in the world’s third-largest economy have been hit by rising electricity bills and will pay more for an additional 6,500 food items by next month, including staples like bread and noodles. Although inflation growth has been fairly modest compared to many other countries, consumer inflation has exceeded the Bank of Japan’s 2% target for five straight months.
In an attempt to soften the blow, Kishida said his government would seek to keep the price of imported wheat at current levels and would consider maintaining subsidies to oil wholesalers to stabilize gasoline and kerosene prices. He ca-lled for a restart of nuclear reactors that have passed s-afety tests since the Fuku-shima accident to meet an expected surge in electricity demand this winter.
The Bank of Japan’s decision to keep interest rates ultra-low helped push the yen to a 24-year low against the US dollar, spurring higher fuel and food prices.
In response, the government has intervened in the currency markets for the first time since 1998 and is likely to introduce an additional budget in the coming weeks that could include at least $105 billion in new spending intended for struggling retailers and households.
Canada: Can’t handle rising cost of living
According to an Angus Reid Institute poll published back in late February, more than half of Canadians admitted they could not cope with the rising cost of living.
Canadian Prime Minister Justin Trudeau recently announced new measures to tackle the country’s soaring cost of living, including the biggest spike in food prices in four decades. His government is increasingly facing political pressure to help the most affected citizens.
Trudeau expects Parliament to pass new measures in the coming weeks, including a $500 lump sum allowance for low-income tenants. A six-month doubling of the low-income sales tax credit is expected to affect at least 11 million Canadians. A new dental care program for children from low-income families will be rolled out, under which families will be paid 1,300 Canadian dollars per child for two years. Government intervention will cost 4.5 billion Canadian dollars.
Most of the measures were pushed by the leftist New Democratic Party, wh-ich agreed to keep Trudeau in power until 2025 in exchange for a social program that benefits the vulnerable and underprivileged.
Inflation in Canada eas-ed to 7% from 7.6% a mon-th earlier as fuel prices de-clined but food prices rem-ained high. “While we are moving in the right direction, it is still too much,” Bank of Canada Deputy Governor Paul Baudry said in a recent speech.
United States: unprecedented inflation
As Joe Biden fights to keep Democrats in Congress in the November midterm elections, one issue is at the top of the minds of US voters: the cost-of-living crisis.
Inflation in the United States is now reaching rates not seen since the 1980s, pushing up the cost of everything from food and housing to cars and medical care.
The Federal Reserve has taken the lead in lowering prices by announcing a series of unusually large interest rate hikes in hopes of bringing inflation back to its 2% target from the current 8.3%.
But the Biden administration has a number of plans of its own, many of which were inspired by the supply chain problems that arose during the coronavirus pandemic, and are aimed at making the US more resilient to sudden price fluctuations.
Plans include the Inflation Reduction Act, which is expected to cost $437 billion over 10 years.
The measures planned by the White House are designed to reduce the cost of prescription drugs and medical services, as well as increase spending on clean energy technologies. The plan also includes $52 billion to boost domestic semiconductor production. Semiconductor shortages have pushed up the price of everything from cars to mobile phones during the pandemic. Biden also approved the release of 1 million barrels of oil a day from the Strategic Petroleum Reserve – the US’s vast underground oil reserve – to drive down fuel prices.